- Company Name
- Nevro Corp.
- Stock Symbol
- Class Period
- January 8, 2018 to July 12, 2018
- Motion Deadline
- October 22, 2018
- Northern District of California
The complaint charges Nevro and certain of its officers with violations of the Securities Exchange Act of 1934. Nevro is a global medical device company focused on providing treatment for patients suffering from debilitating chronic pain. Nevro’s primary products are its Senza spinal cord stimulation systems, neuromodulation devices that deliver the Company’s HF10 therapy.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose material adverse facts about the Company’s business, operations and the proprietary nature of the Company’s principal products. Specifically, defendants allegedly made false and misleading statements and/or failed to disclose that: (1) Nevro had engaged in a fraudulent scheme by using protected confidential and proprietary trade secrets and had stolen documents from its competitors to develop and enhance the Company’s Senza systems; (2) as a result, the Company’s Senza systems were not “novel” or “proprietary”; (3) these practices caused the Company to be vulnerable to increased litigation expenses and adverse legal and regulatory action; and (4) as a consequence, Nevro’s U.S. sales growth was not sustainable. As a result of these false statements and/or omissions, the price of Nevro stock was artificially inflated during the Class Period to over $90 per share.
On April 27, 2018, the truth began to emerge when it was revealed that Boston Scientific had filed an action against Nevro alleging patent infringement, theft of trade secrets and tortious interference with contract. The action alleged that Nevro’s Senza systems violated no less than nine of Boston Scientific’s U.S. patents, detailing a long-running fraudulent scheme by Nevro dating back to at least 2009 involving Nevro’s recruitment of former Boston Scientific employees who stole its confidential, proprietary trade secrets to develop Nevro’s Senza I and II systems.
On May 7, 2018, Nevro announced its first quarter 2018 results, disclosing that while its revenue had increased compared to the same period the prior year, its operating expenses had also increased, driven primarily by “legal expenses associated with intellectual property litigation” with Boston Scientific. This caused the price of Nevro stock to fall $14.67 per share, or 16%, to close at $77.59 per share on May 8, 2018.
On July 2, 2018, Morgan Stanley downgraded the Company based on the ongoing patent litigation, causing the price of Nevro stock to fall another $6.62 per share. On July 5, 2018, a judge for the U.S. District Court for the Northern District of California issued a tentative ruling that threatened to invalidate the lion’s share of Nevro’s patent. The ruling was reported to the market on July 10, 2018, when analysts from several firms issued reports describing the ruling. One report downgraded Nevro stock, citing the patent litigation and cautioning investors to pay closer attention to the ongoing litigation because of the tentative ruling. On this news, the price of Nevro stock fell $11.43 per share, or 15%, to close at $64.04 per share on July 10, 2018.
Finally, on July 13, 2018, Nevro unexpectedly announced it had terminated its Vice President of Worldwide Sales, which caused the Company’s stock price to fall another 15%, or more than $10 per share.